Managing R&D As a Strategic Option

Abstract

OVERVIEW:2007 is Research–Technology Management's 50th year of publication. To mark the occasion, each issue reprints one of RTM's six most frequently referenced articles. The articles were identified by N. Thongpapanl and Jonathan D. Linton in their 2004 study of technology innovation management journals, a citation-based study in which RTM ranked third out of 25 specialty journals in that field (see RTM, May–June 2004, pp. 5–6). The article reprinted here was originally published in 1988 and has been updated with its authors' “reflections.” Addressing the overuse of ROI and related investment criteria in knowledge-intensive situations, the article was one of the first to observe that R&D programs directed toward strategic positioning paralleled the use of call options on stocks. It urged managers to recognize that R&D spending was directed at creating options for the corporation's downstream investment and to take into account the potential impact of this perspective on their R&D strategy.